New plans are in motion to impose on telecoms providers that they must inform customers of mid-contract price increases “in pounds and pence” and at the time of sale. According to regulator Ofcom, contracts do not provide customers with enough certainty due to mid-contract price hikes. These price increases are often linked to inflation rates, and their inclusion has led to millions of customers being subject to excessive bill increases.
Providers usually state in contracts that monthly charges will rise in line with inflation. However, a higher inflation rate in the last year has resulted in higher prices for customers. Ofcom proposed that companies clearly outline the cost increases involved in a contract, rather than incorporating future inflation-linked or percentage-based increases to the prices, which creates uncertainty.
Dame Melanie Dawes, CEO of Ofcom, stated that the existing prices and mid-contract variations in price raise complexity and leave the majority of customers bewildered. She added, “Customers need prices to be crystal clear” particularly during a time when household finance s are stretched. The regulator stated that Virgin Media, which merged with O2 recently, also introduced inflation-linked pricing changes in May.
Ofcom reported over 800 customer complaints related to contract price increases concerning the first ten months of 2022. This figure is almost double that of the same period in 2021. Customers found it tough to understand inflation-linked price rises and didn’t understand RPI and CPI inflation rates. Ofcom stated that mid-contract price hikes could cause significant consumer harm by making competition less effective through complex processes of shopping for deals, limiting customer participation, and complicating contract management. It was observed that customers should not be subjected to the unfair burden of financial insecurity linked to inflation
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